March 27, 2020
Below is an article that was contributed by Gimbel, Reilly, Guerin & Brown LLP, a legal firm with whom we are associated.
We hope this is helpful to you and your employees.
How Will the Coronavirus Affect my Restaurant or Bar Business?
Business Interruption Insurance Coverage
With COVID-19 spreading rapidly, Wisconsin Governor Tony Evers issued an executive order on March 17th forcing restaurants and bars across the state to close their doors. As a result, restaurant and bar owners are losing income and incurring additional expenses because of the coronavirus pandemic. These major disruptions will likely cause an increase in insurance claims by tavern owners against insurance policies offering business interruption coverage. Whether the claims are covered will depend on the terms and conditions of the insurance policy and the circumstances of the loss.
Successful claims under business interruption coverage for viruses are not common. In fact, the law is sparse in the United States regarding business interruption coverage in connection with human infectious disease epidemics or pandemics, as these cases are indeed unique.
What Is Business Interruption Insurance?
Business Interruption insurance is normally part of a larger commercial property insurance policy. Generally, business interruption coverage protects against economic loss that results from a business’s inability to use insured property that has been damaged by a covered peril.
Business interruption typically indemnifies for loss of revenue that would have been earned had there been no business interruption. While coverage language frequently varies depending on the insurer and the coverage negotiated, the following is a sample provision for business interruption coverage:
This policy insures against loss resulting directly from necessary interruption of business caused by physical loss or damage by a peril not otherwise excluded herein to insured property of the Insured, all subject to the terms and conditions of this policy.
Typically, under standard business interruption policies, the following is required to recover for business interruption losses: (1) physical damage, (2) to insured property, (3) caused by a covered peril, (4) resulting in quantifiable business interruption loss, (5) during the period of time it takes to restore the damaged property.
What Does Wisconsin Law say about Business Interruption Insurance Coverage?
It is important to always remember that whether insurance claims are covered will depend on the language of the insurance policy and the facts surrounding the loss. Most often, business interruption coverage is triggered by a physical loss to insured property, such a fire or natural disaster. Wisconsin courts also follow this requirement. For example, in Pamperin Rentals II, LLC v. R.G. Hendricks & Sons Constr., Inc. a construction company sought indemnity from its insurance provider. However, the court concluded there was no property damage subject to coverage because there was no initial physical injury or loss to insured property. The question becomes does the coronavirus constitute physical damage to insured property?
Does Coronavirus Constitute Physical Damage to Insured Property?
Normally, there needs to be an actual physical loss to insured property. Because they type of damage the coronavirus might inflict upon insured property at this time is an unknown, business interruption losses arising from coronavirus will be reviewed closely.
However, restaurant owners in Louisiana have already began litigation arguing that the coronavirus physically infects surfaces and that the coronavirus is like gaseous fumes, which have been found to constitute a physical loss. It is important to always remember that whether insurance claims are covered will depend on the language of the insurance policy and the facts surrounding the loss. Therefore, restaurant and bar owners should always remember to review and check the individual terms of their insurance policy. Alternatively, they should reach out to experienced attorneys for assistance in reviewing their options.
What about Damages Caused by a Civil Authority?
What happens if the mayor or governor set restrictions on your business’ ability to operate? What impact does that government mandated closures have on triggering loss in your business’s insurance policy? Sometimes CGL policies provide a coverage endorsement for “interruption by civil authority.” The Wisconsin Supreme Court has held in some instances that could provide a basis for coverage. Adelman Laundry & Cleaners, Inc. v. Factory Insurance Ass’n, 59 Wis. 2d 145 (1973).
Unemployment Benefits for Restaurant or Bar Owners
Can the business owner receive unemployment benefits if he or she was forced to close my business because of the coronavirus?
Generally, a person is eligible for unemployment benefits only if all the following apply:
1. The person is able to work and available for work.
2. The person has registered for work in the manner prescribed by the Department of Workforce Development.
3. The person conducts a reasonable search for suitable work during that week and provides verification of that search to the Department.
4. If the person is claiming benefits for a week other than an initial week, the person provides information Department.
However, because of the coronavirus, Governor Evers has waived the work search requirement for eligibility to receive benefits. In addition, “corporate officers are limited to 4 weeks of benefits depending on their percentage of ownership and/or relationship to owners of the business. Should the corporation cease operations due to economic unviability, the officer/owner may be eligible for unreduced benefits.” This means that if you, as a corporate officer, are the owner of your own business you may be eligible for unemployment benefits. However, this rule applies only to certain corporations and other business entities.
It is important to note that some corporations may elect to exclude qualified corporate officers from "employment" under Wisconsin's Unemployment Insurance law. The excluded officer's wages are not subject to state Unemployment Insurance taxes. Therefore, these excluded officers will not be entitled to draw unemployment benefits!
Employers who have elected to exclude their principal corporate officer wages can rescind the exclusion. Employers must notify the Department of Workforce Development before March 31 of the year they wish to reelect coverage of corporate officers. Wisconsin law allows employers to exclude principal officers and reelect coverage of those officers only once. Therefore, future elections to exclude principal officers will not be approved.
If restaurant or bar owners know that they have previously made this election, they may wish to rescind this election to be able to receive unemployment benefits. Business owners should discuss these options with their trusted advisors.
Contact a Milwaukee, Wisconsin Business Attorney Today
If your restaurant or bar business has been severely affected by the coronavirus, you should contact the skilled Milwaukee business lawyers from Gimbel, Reilly, Guerin, & Brown, LLP as soon as possible. We will help guide you through these difficult times of being a small-business owner. Contact our office at 414-271-1440 to schedule a consultation today.
Pamperin Rentals II, LLC v. R.G. Hendricks & Sons Constr., Inc., 2012 WI App 125, 344 Wis. 2d 669, 825 N.W.2d 297
Adelman Laundry & Cleaners, Inc. v. Factory Insurance Ass’n, 59 Wis. 2d 145 (1973).